Oberoi may fetch up to Rs 7,000 cr from Borivali land

SummaryMumbai-based Oberoi Realty had bagged the 25-acre Tata Steel land parcel on Tuesday.

The 25-acre Tata Steel land parcel that Mumbai-based Oberoi Realty bagged on Tuesday is expected to have a sales potential of Rs 6,500-Rs 7,000 crore, informed sources said.

On Tuesday, Tata Steel announced Oberoi Realty as the highest bidder for the Borivali land located to the north of Mumbai on the basis of its final bid of Rs 1,155 crore. The coveted land parcel is estimated to have a total development potential of 2.5 million sqft and 4 million sqft after obtaining permission for public car parking. "Currently, the rate in Borivali is around Rs 15,000 per square feet, so with that calculation, the project could fetch anywhere between R6,500 and R7,000 crore," a source said.

The process of land sale was conducted by global real estate consultant Knight Frank through an e-auction on Monday, after conclusion of several rounds of bidding. Tata Steel had put the land located at the junction of Western Express Highway and Dattapada road in Borivali (E) on the block in December 2013. Developers like Kalpataru, Tata Housing, Piramal Realty and tech major TCS were also in the race for the plot.

Details of how Oberoi plans to fund the land purchase still remain unclear as the company has not shared them. However, sources close to the company say that arranging funds would not be an issue for Oberoi, as it has around R1,000 crore of cash, some of which could be utilised for this transaction and, if at all required, the company may raise the remaining amount from external sources.

Oberoi Realty's share price rallied as much as 17.64% to R234.50 in intra-day trade on Wednesday on the land deal announcement, before closing up 9.69% at R217.95, on BSE.

The terms of payment for the plot will require Oberoi to pay 10% of the bid value as earnest money deposit in two days at the time of signing the Letter of Intent. The balance is expected to be paid by April 28, following which MoUs will be entered between Tata Steel and the developer.

The transaction terms include that the developer obtain the collector's permission for the sale of land forming part of the total property and a no-objection certificate from the labour authority. According to the bid documents, if the bidder is not able to obtain these approvals within three months, the MoUs will automatically stand cancelled and Tata Steel will forfeit the participation deposit and earnest money